The Pitfalls of Freight Insurance

No matter how good your freight provider is, approximately 1 – 2% of all freight is lost or damaged in transit.

For some businesses, a lost or damaged shipment has only a minor impact on the bottom line. But for others, especially those in the medical and mining industries, a lost or damaged shipment can have a huge impact – and not just financially.

In this article, we’re going to walk you through the pros and cons of freight insurance, how to decide whether you need it, and what to look for in a freight insurance provider. We’re also going to introduce you to a freight insurance alternative – the freight warranty – and share why we think it’s an essential part of smarter freight.

What is Freight Insurance?

Sometimes referred to as marine insurance, freight insurance is essentially like any other type of insurance you can buy. It insures you against the potential risks involved in shipping your goods.

So, if your goods arrive damaged or are lost on their way to their destination, freight insurance will financially compensate you for that damage or loss.

How Does Freight Insurance Work?

There are two ways you can insure your goods with freight insurance. These are Single Cover Insurance or a Yearly Cover Policy.

Single Cover Freight Insurance

This type of freight insurance is where you take out insurance for a single item or consignment. This is perfect for when you have to send a single item or consignment that’s of high value and needs to arrive in perfect condition. If this single item becomes damaged or lost, you’ll be covered by your insurance, but any other consignments you send will not.

Yearly Cover

Yearly Cover does what it says on the label. You work with an insurance provider to assess your unique needs and they will supply you with a yearly premium to cover each and every consignment you send across a year. So, if one or two of your consignments go missing or are damaged in transit, they will be covered by your insurance. But you’ll also be paying to insure every other consignment that doesn’t.

Common Pitfalls of Freight Insurance

If you’re going to make the investment into freight insurance, then you’re going to want to consider some of these common freight insurance pitfalls.

Added Costs & Expenses

Freight Insurance premiums can be expensive.

And it’s not 100% guaranteed that you’re going to have a damage or loss with your consignments. If you don’t, then it ends up being a sunk cost within your business.

We aren’t saying that you shouldn’t have insurance. But we are saying that you should consider the likelihood of needing to make a claim, as well as the cost to your business if a consignment were to go missing or arrive damaged.

Make sure you crunch the numbers and weigh up the benefits. Will insurance be a financial asset to you, or just a cost? Don’t forget that if you make regular claims on your policy, you’re likely to see your premiums increase the following year.


In addition to the premium you pay, if you need to make a claim, you’ll also have to pay an excess.

On average, freight insurance excess runs at about $1,500 per claim and you’ll need to factor this excess into your costs when you’re comparing insurance options.


If you’re going to take out freight insurance, it’s important to make sure that you’re actually insured for what you think you’re insured for.

It’s a nasty surprise to have your claim denied because your policy doesn’t cover your freight type or the freight carrier wasn’t listed in the shipment policy.

Late Claims

Most insurance policies will include a timeframe in which you must make a claim. If you miss the deadline on this timeframe, you could find your claim is denied.

Packaging Quality

You should make sure that all your goods are packaged to a high standard. If you’re packaging is clean and tidy, your goods are less likely to be damaged. If they’re loose, bulky, glass or otherwise fragile, they have a much higher risk profile that will impact the cost of your insurance premium.

No Records

Taking photos to make sure you have visual record of your shipment is critical.

This applies both before you send your freight (showing that the shipment was well packed and in good condition before it was sent) and the moment you realise it’s damaged.

If you’ve got no records, it can be hard to prove your claim.

Make sure you include the transit label in the photo as this ensures that the damaged consignment can be easily identified. This is even more important if you’ve taken out insurance on a single consignment.

What to Look for When Choosing Freight Insurance

When you’re choosing freight insurance, here’s the most important factors to consider.

Experience of the Insurance Provider

Make sure that you’re purchasing your insurance through a blue-chip provider.

They should be experienced in dealing with freight and have a reputation delivering good customer support in the event that you need to make a claim.

At Freight People, we can connect you with a reputable insurance broker who can tailor a freight insurance policy to your freight needs.

Level of Coverage

Make sure that your policy actually covers what you need it to cover.

Check that you’re covered for the type of freight you send and will receive an appropriate level of financial compensation in the event that you need to make a claim.

And if you have one consignment that you need peace of mind on, then single cover is a great solution.

Read Reviews & Testimonials

Do your research.

Read reviews and testimonials about the providers on your shortlist. Don’t forget to look for information about how they manage their claims process – there’s no better measure of an insurer than their level of customer service once the sale is complete and they actually have to pay a claim.

Should I Have Freight Insurance?

Whether or not you should take out freight insurance depends on a couple of important factors.

Your Level of Financial Exposure

Freight insurance reduces your exposure to potential financial loss and this is the number one benefit of taking out a policy. If you ship consignments that are of high value and this freight was damaged or lost, insurance takes on some of the financial burden.

What You Ship and How You Ship It

The risk profile of your freight and the mode of transport you use to ship it might also warrant the investment into freight insurance. For example, if you ship glass, solar panels or other fragile items, these have a higher chance of being damaged in transit. And if you regularly send your freight by rail, there’s a higher chance of damage than if you’re sending it by air.

Contractual Requirements

In some cases, a contract you have with a customer might require you to use freight insurance. Make sure you read the fine print of any customer agreements to ensure you’re meeting your obligations.

Freight Warranty: The Alternative to Freight Insurance

Freight Insurance isn’t your only option when it comes to covering freight risk.

At Freight People, all our customer’s freight is covered by a freight warranty.

This warranty is covered by a small fee that’s applied to each consignment you send, and in the event that your freight is lost or damaged in transit, the warranty will pay you a single, fixed, agreed payment amount to cover your loss.

While a freight warranty only pays out a claim to a capped dollar amount, it enables you to better spread the risk of damage or loss across all your consignments.

The Benefits of a Freight Warranty

It’s a level of cover without the cost

We’ve already established that freight insurance can become very expensive. A freight warranty gives you a level of basic financial cover at a very low cost in comparison.

There’s no excess

If you ship hundreds or thousands of consignments each year, and one of them happens to be in the 1 – 2% that go missing or are damaged, then you’ll be able to recoup some of your financial loss, without having to pay an excess.

There are 3 Levels of Cover

Depending on the value of your consignment, there are three levels of warranty cover to meet the level of value of your goods.

It can pay your Freight Insurance Excess

You can use your freight warranty in conjunction with your freight insurance. If you take out freight insurance on a consignment and you need to make a claim, you’ll have to pay an excess. Your freight warranty payment can be used to cover this cost.

At Freight People, we use FreightSafe Warranties for all our customer’s freight. You can read more about why here.

So, is freight insurance worth it?

If you deal in high value goods, have a single consignment you need peace of mind on, or you’re looking for flexibility on the level of cover for your freight, then freight insurance is worth the investment.

You’ll want to choose a reputable insurance partner, check that your policy covers you appropriately based on the type of freight you send, and what the excess will be if you need to make a claim.

A warranty, like the one we offer at Freight People, is a great alternative that gives you broad coverage at a fixed payment level for a lower cost and no excess. A warranty can also be used in conjunction with freight insurance to help cover your excess.

Looking for a reliable freight partner? Freight People can help.

Whatever your mix of freight - fragile, medical, bulky, road, rail - we have a solution for you. Get in touch with us today and find out how we can simplify your freight.

Are you a Freight People customer who needs to make a warranty claim?

You can do that via our claims form here

Note: This is general advice only. If you want more specific advice around freight insurance, contact an insurance specialist, or get in touch with us to discuss your specific needs.